Articles Posted in Estate Planning

Every single person, regardless of how large or modest they may feel their assets are, needs to have a well thought out estate plan that covers three very basic planning instruments that will serve your best interests. Those three planning instruments include a durable power of attorney, a health care proxy, and a last will and testament. Each of these will cover an important aspect of our lives and our family’s lives after we pass away and should be taken very seriously, regardless of what you believe your financial or lifestyle limitations may be.

First, your estate plan will need a durable power of attorney allows you to designate another person to manage your property and/or finances during your life in the event your are unable to do so for yourself. This authority should be vested in a trusted individual you can trust and be sure will act solely in your best interest should the time come that you will need to rely on another for some type of guardianship.

Next you will need to create a health care proxy, which is essentially a form of a power of attorney that deals solely with health care decisions. This durable power of attorney allows you to appoint another person to direct your medical care and make important end of life decisions should you be incapacitated. In New York, this health care proxy should will need a medical directive (also known as an advance directive) providing guidance to your health care agent.

Creating an estate plan is an important process every single person needs to undertake in his or her lifetime to ensure their final wishes are carried out and estate assets are distributed properly upon death. Despite this importance, many ordinary people still make excuses with one reason or another why they do not need an estate plan, last will and testament, or set up a health care directive.

One of the most common excuses people make for not having an estate plan is thinking that their estate is simply too small or they do  not have assets that warrant that level of planning. Even if your estate is modest, you still need to create a living will or health care directive to help loved ones make health and financial decisions on your behalf in the instance you may be left incapacitated or otherwise unable to act for yourself.

Another common excuse is believing that having joint ownership of bank accounts with children is a proper mechanism to transfer wealth to upon passing away. The reality is that unless you are only leaving behind a single child, it is nearly impossible to separate accounts for more than one child equal. This can become even more difficult if you find yourself suddenly incapacitated or unable to manage these accounts yourself.

Planning your estate is an extremely important process and should be taken very seriously in order to avoid hassles or any extra delay that could come with passing your estate through probate or otherwise transferring assets to loved ones and friends. With proper planning and attention to detail, most folks can avoid some of the most common estate planning mistakes and avoid any costly and prolonged probate process.

One of the most common estate planning mistakes is adding a friend or younger family member’s name to a joint account as a matter of practicality to make accessing the deceased’s bank account after passing away to pay for funeral costs and other bills. While this may seem like a good idea to some, the reality is that this can create confusion over the deceased’s intentions and may complicate probate. A better alternative is to give a trusted  individual power of attorney to make financial decisions if incapacitated and a prepay for funeral expenses.

Instead of leaving assets to heirs in a will outright, individuals should consider setting up a trust for these assets to pass onto upon the grantor’s death. This way the heir does not take on unwanted wealth to his or her name and complicate tax considerations or Medicaid planning. This can also shield the assets from creditors who may go after the wealth to recoup debts incurred by the heir.

Family post trusts are a special type of trust that allow a trustee to allocate distributions among a class of beneficiaries and are often implemented because of the increased flexibility they offer regarding distributions. Unfortunately for trustees, administering these trusts is hardly straightforward and he or she will often have to manage delicate family situations and competing interests between beneficiaries. In situations where animosity exists among family members, these dynamics can create discordant expectations so clear guidance in the trust becomes a critical aspect.

While managing a family pot trust, the trustee (the individual tasked with administering the trust on behalf of beneficiaries) must keep in mind his or her fiduciary duty to the beneficiaries required under the law. This includes acting an impartial manner in order to treat beneficiaries in an equitable and equal manner in accordance with the conditions laid out in the terms of the trust. Essentially, the trustee of a family pot trust cannot favor one individual or class of beneficiary over another, unless specifically authorized by the trust.

To help make managing the trust easier, trustees should consider keeping a running total of all the distributions made to various beneficiaries, thus enabling him or her to know if all the beneficiaries are receiving benefits equal with the grantor’s wishes. Additionally, trustees should proactively communicate with beneficiaries in a direct manner to manage personalities and needs as well as financial duties under the trust. Such communications should also be documented as a hedge against any possible legal action taken by a beneficiaries who may feel slighted in some way.

A recent report by Reuters suggests that many older adults are abstaining from taking their prescribed antidepressants or continuing to use them as directed by their doctors, that according to a Dutch study examined by the news outlet. If true, the study highlights mental health challenges facing millions of people around the world who may otherwise be willing to continue medication issued by a psychiatrist but balk at treatment from primary care doctors.

The study examined roughly 1,500 people who were at least 60 years old and diagnosed with depression in 2012 by primary care providers finding about 14 percent of patients with depression failed to take their antidepressants within two-weeks. For those patients who did take their medication on time, 15 percent missed taking doses 20 percent of the time and 37 percent overall ceased taking their antidepressants altogether within one year.

The study also found that many patients in the study tended to be more consistent with taking medication when these individuals were already used to taking daily medications for a variety of other chronic health issues. Those patients already on other medications were 11 percent less likely to fail at beginning antidepressant regimens and 13 percent less likely to take these same drugs on an inconsistent basis.

A recent report by The Washington Post suggests Congress is considering legislation to help bail out billions of dollars worth of failing pensions and retirement accounts across the country in a move to try and solve a retirement crisis that threatens more than 1 million Americans. Claiming to have obtained a draft of the plan, The Washington Post reports the legislation would direct the Treasury Department to spend up to $3 billion annually to subsidize payments for retirees from certain underfunded pensions.

Additionally, the plan would require benefit cuts, higher premiums and new fees levied against companies and union members in an attempt to make the pensions as financially solvent as possible. The plan will cap contributions from taxpayers and ultimately ask for important concessions from all of the parties involved in the situation.

Due to issues such as mismanagement, inaccurate economic projections and in some cases corporate bankruptcies, many substantial pension funds are at risk of essentially going bankrupt and threatening the safety net many retirees were counting on. The problem is compounded by the fact that the multiemployer pensions which require workers from multiple companies pay into the same retirement benefit program, creating ripple effects when one becomes insolvent.

When an elderly family member is diagnosed with Alzheimer’s related dementia, it is time to discuss the details of legacy, financial, and estate planning. While connecting a loved one with support services is the priority when their memory is beginning to fade from age, formation or modification of financial and estate planning to meet their needs during their last years is often a key family decision. No matter how well an elderly family member has planned for financial and estate distributions, review of those plans to accommodate the expense of residential treatment or other medically related support costs will ensure that an elder is taken care properly while alive; as well as cover memorial and funeral costs at time of death. A licensed attorney can assist with the formation of a combined financial, estate, and legacy plan to suit an elder’s needs.

Law of Diminished Capacity

Within U.S. federal law, the definition of “diminished capacity” applies to incapacitated parties no longer exhibiting full mental ability. If an elder lacks the ability to make routine decisions about complex matters, they may be suffering from memory loss or dementia related to the onset of Alzheimer’s disease. Patients diagnosed with dementia still have legal rights to their property and assets. Spouses of incapacitated parties are the primary decision makers under law. According to New York rules of intestate succession EPTL 4-1.1, If no living spouse or will exists, and another family member has not already been given power-of-attorney, rights to legacy, financial and estate planning on behalf of  an incapacitated party may be assigned to court appointed trustee.

In October 2018, new statutory legislation recommended by the Irish Law Reform Commission of the country’s cabinet considered a rule that would block those found guilty of killing their domestic partner or spouse from unjust enrichment attached to financial or estate proceeds. In the United States, spousal property is customarily subject to rules of intestate succession in a probate court proceeding, when one spouse is found to have been unlawfully killed by another. If not other legitimate heirs or beneficiaries are present, spousal property part of estate assets is escheat to state coffers. In states with Dead Man Statute provision, heirs or beneficiaries may contest the last will and testament of a decedent. New York Dead Man Statute protects a decedent from a spouse making false claims in court.

Irish Estate Law and Spousal Protections

The proposal comes at a time when an Irish citizen, Eamonn Lillis received distribution of a near 1.3m euros (£1.16m) from his spouse’s estate, despite being found connected to her manslaughter. Jailed for six years between 2010 and 2015 for assault and battery of Celine Cawley, his wife, Lillis maintains the responsible party was a trespasser on their property, who had broken into the home. The proposed legislation seeks additional protections for spouses harmed by their partners; prohibiting guilty parties from any financial benefit flowing from spousal property. The Irish government is also considering statutory provision concerning cases where a spouse has aided or abetted in the murder or manslaughter of their partner. To present, Irish law has not prohibited claimants who have commissioned unlawful killings of their spouse from inheriting joint assets (i.e.  co-owed property); as seen in the High Court decision in favor of Lillis’ claim.

New York State Department of Taxation and Finance (“DTF”) announcement that it will investigate President Donald Trump’s estate comes at a time when the federal Internal Revenue Service (“IRS”) is pursuant of accurate reporting information about the presidential family’s wealth. Trump’s lawyers cite the 3-year federal and New York state statute-of-limitations in response to recent allegations that the estate aggressively undervalued properties on state and federal tax record. Properties reported on a gift or estate tax return form to the IRS and the state, however, make it unlikely additional disclosure will be required, and not after the statute runs out.

The Presidential Audit

A New York Times report suggests Donald Trump gave Fred Trump a $15.5 million stake in a Trump Palace development in exchange for forgiveness of loans to his son – an amount subject the federal 55% gift tax rate. Fred Trump apparently never reported the gift at the individual-level, nor is it reflected on the estate tax return, and this has the potential to involve Donald Trump an investigation due to his role as an executor of the estate. In 2000, the Fred and Mary Trump estate was audited. The audit included gift tax returns that had been audited in the 1990s, making any further investigation impossible as those records could not be reopened.

The news that the First Family protected their assets from additional taxation is now the subject of Congressional debate over potential reforms to federal estate tax law. Following the announcement that the New York Department of Taxation and Finance (“DTF”) is looking into near future audit of the Trump family estate, similar Internal Revenue Service {“IRS”) code was called into question. If existing federal and state tax statute is allowing taxpayers estate tax loopholes, what are the consequences for government finance? Tax dodgers usually seen as a limited segment of the American population, may in fact represent a far greater proportion of taxpayers than thought. Allegations that President Donald Trump’s father’s estate had applied fraudulent accounting methods to avoid higher estate taxation, apparently has saved the family millions that would have otherwise been owed to the government.

Congressional review of tax loopholes in FY18Q4.

With democrats keenly focused on review of what might be federal IRC loopholes present within Part 4. Examining Process, Chapter 25. Estate and Gift Tax, Section 1. Estate and Gift Tax Examinations, future reform is likely. The current rules lower the valuation of estates based on minority ownership of assets, and the result is a lower tax bill. As tax experts point out, controlling shares are more valuable than minority shares. Distribution rules to shares of an estate allow for families to report split shares. Violation of current law occurs when an estate reports transfer of minority shares, exclusively; reducing the reported valuation of an asset. Congressional attention is now being given to IRS and New York DTF enforcement of existing federal and state laws. The IRS budget reportedly dropped more than $800 billion between 2010 and 2017 during the Obama Administration.

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